Kangping Technology (Suzhou)'s (SZSE:300907) Solid Earnings Have Been Accounted For Conservatively

Kangping Technology (Suzhou) Co., Ltd. (SZSE:300907) announced a healthy earnings result recently, and the market rewarded it with a strong uplift in the stock price. This reaction by the market reaction is understandable when looking at headline profits and we have found some further encouraging factors.

View our latest analysis for Kangping Technology (Suzhou)

The Impact Of Unusual Items On Profit

For anyone who wants to understand Kangping Technology (Suzhou)'s profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥12m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Kangping Technology (Suzhou) doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Kangping Technology (Suzhou).

Our Take On Kangping Technology (Suzhou)'s Profit Performance

Because unusual items detracted from Kangping Technology (Suzhou)'s earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Kangping Technology (Suzhou)'s earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share increased by 65% in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. So while earnings quality is important, it's equally important to consider the risks facing Kangping Technology (Suzhou) at this point in time. When we did our research, we found 3 warning signs for Kangping Technology (Suzhou) (1 is a bit concerning!) that we believe deserve your full attention.

Today we've zoomed in on a single data point to better understand the nature of Kangping Technology (Suzhou)'s profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.